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Investors press for progress on climate financing ahead of Cancun

By
Joel Kirkland

E&E News / Climatewire

November 17, 2010

Pension funds and other institutional investors eager to tap into financial opportunities tied to cutting greenhouse gas emissions say they would like nothing more than to put their money where their mouths are. Just ahead of the U.N.-led climate summit in Cancun, Mexico, starting at the end of this month, money managers are banging the drum for progress on adaptation financing, clean energy, reforestation and emissions targets. But they acknowledged yesterday that the smart bet is on incremental progress and not the frenzied expectations that defined the lead-up to the 2009 conference in Copenhagen, Denmark.

Pension funds and other institutional investors eager to tap into financial opportunities tied to cutting greenhouse gas emissions say they would like nothing more than to put their money where their mouths are.

Just ahead of the U.N.-led climate summit in Cancun, Mexico, starting at the end of this month, money managers are banging the drum for progress on adaptation financing, clean energy, reforestation and emissions targets. But they acknowledged yesterday that the smart bet is on incremental progress and not the frenzied expectations that defined the lead-up to the 2009 conference in Copenhagen, Denmark.

"One of the problems of Copenhagen was that expectations were far beyond what could be realized," said Timothy Wirth, president of the U.N. Foundation, a public charity that supports U.N. activities. "People have to take a realistic look at Cancun. A number of building blocks can be put together, and Cancun can be a good step on the route toward Rio-Plus-20."

Even before its summit in Cancun, climate negotiators and investors are building steam toward a 2012 international conference in Rio de Janeiro, Brazil, two decades after the Rio Earth Summit in 1992 that established a framework for global cooperation on combating climate change.

"Those green economy agreements in Rio are the next stopping point where we have the opportunity to achieve some significant long-term global agreement," Wirth said.

U.S. private capital heads overseas

A coalition of investors, led by Boston-based investor advocacy group Ceres, urged nations meeting in Cancun to hash out climate financing issues. It said governments in developed and emerging economies should spur clean energy, put a price tag on industrial carbon dioxide emissions, phase out fossil-fuel subsidies and begin adapting to climate change.

The investor groups, which include a dozen U.S. public pension funds and state treasuries, say too much U.S.-based private capital is heading overseas to nations with long-term plans for shifting their economies toward cleaner forms of energy. Further, disruptions to agriculture and the hit to corporate profits that could come with shifting climate patterns are too big to ignore and could dwarf the recent financial crisis.

"Climate change may be out of vogue in Washington today," said Jack Ehnes, CEO of the California State Teachers' Retirement System. "But it poses serious financial risks that are not going away and will only increase the longer we delay enacting sensible policies to transition to a low-carbon economy."

Coming into Cancun, many readily acknowledge that the downside is that the United States has failed to take most of those steps on a big enough scale to lead other nations. The group cited a U.N. Environment Programme (UNEP) report tallying that policies in Europe and China supported about $40 billion worth of investments in renewable energy projects in 2009, roughly double the investments in North America. That has also translated into lagging job growth, according to the investors.

"While we don't have hope that there will be a comprehensive, 180-country climate treaty, there is reasonable grounds for optimism about [climate adaptation] financing opportunities that come out of Cancun," said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk.

Ole Beier Sorensen, chief of research a strategy at the Denmark-based pension fund ATP, said progress is needed on raising international funds to aid poor countries in adapting to climate change. An internal U.N. group is exploring options for building the war chest for adaptation. "It's important to all of us that this discussion is not closed," he said. "There are significant difficulties and significant disputes related to this issue."

'Where is the Treasury Department?'

Last month, U.N. Secretary-General Ban Ki-moon told the European Parliament that he considered climate adaptation financing for poor nations the front-and-center issue for the Cancun talks. In Copenhagen, the world's wealthy nations pledged $30 billion in "fast-track" financing through 2012, but there remain significant uncertainties about meeting a $100 billion target by 2020.

Sorensen agreed that financing should get top billing in Cancun, but he suggested the issue remain open for at least another year. "If we try to push it ahead too fast, we'll simply be stuck with disagreements that we know so well in advance," he said. "There will be painful choices related to it."

The U.N. Foundation's Wirth is a former Democratic senator from Colorado who has been increasingly outspoken about U.S. policy deficiencies. He stumps for increased use of natural gas during the interim 20 years prior to broader deployment of clean energy technology still being developed, and he also presses for energy efficiency.

Wirth pressed the U.S. Treasury Department to design long-term financing vehicles to help companies pay for energy efficiency improvements.

"It has the technical expertise that's necessary to fashion the kinds of financial instruments we're talking about," Wirth said. On matters of clean energy financing, Wirth said of President Obama's Treasury, "So far, they have been notably absent from the discussions."

Wirth called on the main pillars of U.S. economic policy to take direct action.

"Where is the Treasury Department? Where is the Commerce Department? Where is the Federal Reserve?" he said. "Providing the framework for investment is nothing new. We've done that in our economy for a long, long time."

Wirth noted incentives for long-term capital gains, home ownership and tax policy issues. The U.S. government just pumped $600 billion into the economy by repurchasing Treasury bonds, Wirth noted.

"Why not invest in this kind of new energy infrastructure?" he said. "That's the question that should be asked of the administration and the new Congress."